Case Write-up

Irizar in 2005

Group 8
Sushmitha Penta
Dhwani Shah

28th November, 2019

Introduction
Irizar is a co-operative belonging to Spain’s Mondragon Co-operative Corporation (MCC)
manufacturing luxury coaches. It is based out of a small town called Ormaiztegi. Under
the leadership of Saratxaga, Irizar went from being bankrupt in 1991 to be one of the
world’s preeminent luxury coach makers as of 2005. It has seen a CAGR of 23.9% over
the last 14 years and production rate of 1600 coaches per year. As of June 2005,
Saratxaga had chosen to leave the company and the question to be answered is how will
Irizar evolve in the future without his leadership.

Organization Structure
Irizar’s organization structure is not very commonly seen in a manufacturing enterprise
which usually has a lot of departments and hierarchy. Irizar does not have any kind of
departmentalization as it has no official departments, no secretaries nor walls segregating
employees except for meeting rooms which is accessible to everyone. The entire team is
divided into three groups - manufacturing group consisting of 650 individuals, reliability
group with 45 individuals and coordinating team with 9 people. Within these groups,
there are teams of 4-5 members each and a team leader is chosen by its members only.
The teams themselves define objectives for their task and lay out a plan of ideas. There
is no formal hierarchy nor a reporting mechanism between team leader and the members,
everybody has their own set of tasks and it is understood that the individual is responsible
for his/her set of tasks.

It is the trust in people that requires no control and monitoring in this kind of structure

- trust that each member would work for 8 hours a day and hence there is no clock-
in/out time stamp
- trust that each member works responsibly towards fulfilling their objectives; trust
that every member is committed to customer satisfaction
- trust that incentives are not required to encourage members to achieve/exceed
objectives

Decentralisation: One of the main characteristics of the organisation is decentralisation

considering that the company provides remarkable autonomy and decision-making is in
the hands of every member of the co-operative.

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No formalization: Irizar clearly follows low formalization given that the jobs/roles are
not standardized (no words such as boss, employee, manager, director are used) and all
the individuals are considered owner-operators and team members, except a few taking
a title of coordinators or leaders. There are also no formal processes defined in the
organization and this enables them to be autonomous.

Reward system: Irizar did not have any individual evaluation process, which is very
commonly found. They believe that it’s humiliating and counterproductive to improving
the overall system of the organization. Given that the teams set objectives themselves,
they are allowed to evaluate themselves. This again establishes the fact that trust in an
individual can lead to performance and not necessarily control or monitoring. And the
individuals here are allowed to earn beyond their wages in terms of equally shared profits,
which means the common goal of organization success is contributing to individual
earnings.

Hiring & Training: Irizar looks for people that fit into the work environment by being
adaptable, trainable, and focused on the customer. They do not have any specific
selection process designed to hire a member, instead they go with their intuition if the
person is extroverted, energetic and valuable to Irizar. The training methodology involves
an existing member becoming a tutor rather than having a separate training team. These
actions are in coherent with their philosophy of learning through teamwork and being
autonomous.

Continuous Innovation
Irizar believed that everyone in the organization must contribute to innovation and not a
specific R&D team unlike other manufacturing companies. R&D department was removed
as their understanding of the client was much less and their speed was never in line with
outside environment. Instead, Irizar had an objective that each person should contribute
two suggestions for improvement or innovation per year. This encourages people
participation and reinforces people’s motivation.

The people working in the teams have more generalized skills, are less specialist and
enjoy wide autonomy and development possibilities in their work. The idea of open
communication in the organization encourages shared learning which is very essential in
self-management teams. The work teams have been one of the main tools through which

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the company has achieved continuous, intensive cooperation between different
professionals, with very different knowledge, that characterizes the process of
technological innovation.

How will the company evolve?

With Saratxaga leaving, there could be two alternatives - (1) A leader from outside the
company (2) A leader from inside the company. There is a risk of system getting changed
in case of (1) as someone from a senior leadership position in another firm might already
a different style of leadership and not necessarily follow Saratzaga’s and thus could lead
to drop in revenue/profits. In case of option (2), the member from inside would already
have an understanding of the culture of Irizar and have followed it over his/her years of
work experience in Irizar. Hence, he/she would try to maintain the culture, philosophy of
Irizar as Saratxaga, if not 100% to some extent. Before Saratxaga leaves, he needs to
find a suitable member from Irizar to fill his shoes.